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15 July 2024

Sukuk market set to hit $100bn

By Staff Writer
The global market for sukuk more than doubled in 2007 to exceed $60 billion and is on track to top the symbolic $100 billion mark in the next few years, according to a Standard & Poor's Ratings Services report published today.

"We expect sukuk growth to remain on the same impressive trajectory, fueled by huge investment and financing needs - notably in countries of the Gulf and Asia," said Standard & Poor's credit analyst Mohamed Damak.

Sukuk growth nevertheless has been slowed in the past six months by unfavorable credit market conditions. Some sukuk were postponed when liquidity dried up and credit spreads widened. However, Standard & Poor's said that it expects "issuance to resume double-digit growth".

Most sukuk issued last year were "ijara" (lease financing) or "musharaka" (venture capital financing) varieties, but S&P said that it believes other types to become more common. The US dollar continues to be the currency of choice for sukuk issuers, but has been declining in favor over the past five years.

Corporates and entities involved in project finance are the main issuers, with banks coming in second, according to the S&P report.

"Corporates find that sukuk are an alternative to financing their business or their projects, and financial institutions are increasingly turning to sukuk to sustain strong lending growth with stable funding sources and to curb maturity mismatches," said Mr. Damak.